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Are there too many foreign workers?

Date

2013

Authors

Davd Green

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The Vancouver Sun

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An election should be a time to discuss key policy directions. One of the biggest policy transformations in the Harper era has been the enormous growth in Temporary Foreign Workers (TFWs) - "guest" workers who come to Canada for short periods, generally tied to specific employers, without future prospects for immigration or citizenship, and without a genuine ability to defend and protect their workplace rights (if they believe their employment rights or workplace safety has been violated, and they complain, they may be rewarded with a ticket home).

In 2004, Canada admitted 112,543 TFWs. By 2008, this had grown to 192,281 (a growth of 57 per cent) before declining somewhat in 2009. To put this in perspective, Canada now admits almost triple the number of TFWs as it does immigrants under the conventional "Economic Class." The expansion in the TFW program is unprecedented and represents a sea change in immigration policy. Yet there has been only limited debate on this issue (it received a short mention by Jack Layton in the leaders debate).

What is the rationale for this expansion? In its Annual Report to Parliament, Citizenship and Immigration Canada argues that TFWs are needed to "address labour market shortages and to provide other economic opportunities for Canadians."

Underlying this rationale is a view of the economy as an engine. If one piece in the engine is missing -no matter how small -the whole engine will stop. On the face of it, this appears reasonable. If a specialized technician is needed and can't be found in Canada, bringing in a person on a temporary basis to set up a new piece of technology seems like a good idea. That is how the TFW program was justified in the past. But with the number of TFWs entering in a year far exceeding the number of regular economic immigrants, this can't be the only argument behind the current program. In fact, the number of TFWs in professional occupations (where one might reasonably make a skill-gap argument) did not change between 2005 and 2009, while the number of TFWs in the "Elemental and Labourers" occupation group (which, by definition, does not include workers with advanced skills) increased by 400 per cent.

The only conceivable explanation for this pattern is that the Harper government has taken the labour shortage argument to an extreme: if a firm has difficulty filling any position of any type, workers need to be brought in or economic growth is put at risk. In 2006, the government sped up the processing of TFWs in occupations facing shortages in Alberta and B.C. The list of occupations included janitors and food counter workers. Apparently, under this rationale, economic growth would stall if a fast-food outlet had difficulty staffing its restaurants.

What is missing in this rationale is the wage. When firms claim there is a "shortage" of workers, what is implicitly meant is that they cannot find workers at the wage they are offering. This extra condition is crucial. Economies do not operate like engines but more like organic entities that are constantly in flux. Those fluctuations are shaped by wages and prices.

If a food kiosk can't find workers then it needs to raise its wages and prices. If customers decide that price is too high and start making their own cup at home, that is the way the market should work. Society's resources (in this case the workers) should be allocated where they have the most value to the economy.

The key question is when do we want to intervene in that allocation process? It's clear why employers argue for TFWs. If demand for coffee rises and the firm can keep its wage costs low by bringing in workers at its current low wage then profits will rise. But the expansion of the TFW program has been accompanied by an expansion in the number of stories of these workers being exploited by firms. Do we, as a society, want to keep the price of services low at the expense of creating an underclass of workers with tenuous labour rights?

More broadly, real wages for high school or less educated workers starting a new job declined by approximately 20 per cent between 1980 and the mid-2000s. Why would we embark on a policy that exacerbates this trend? The economy will not stop if their wages rise. This part of the policy seems to be more about keeping wages down than generating economic growth.

What about the skilled TFWs, where one might make an argument that there is a gap that needs filling? Here, too, we need to ask hard questions before interfering in the operation of the market. Bringing in pipefitters and carpenters reduces the return to investing in those occupations. At a time when we want to encourage young people to invest in skills, it seems odd to expect them to do so while sending them the message that if wages in their occupation ever rise, we will bring in TFWs to stop it.

The expansion of TFWs is a Harper government initiative that breaks with past policies. Looking at it closely reveals a policy direction that is heavily focused on business interests to the detriment of workers' wages. Whether that is the direction Canadians want should be debated much more than it has been.

David Green is a professor of economics at the University of British Columbia, and a research associate with the Canadian Centre for Policy Alternatives.